Well I hope you'll invite me, because I am an Episcopalian, baptized, confirmed and former choir girl! And I am embarrassed to say I assumed you were a man because you are a priest. There goes my feminist credibility right down the drain. Sincere apologies and again, major respect to you for your thrifty ways and your idealism that led you to abandon the big bucks for a calling for which you are obviously well-qualified.

As soon as my last post went up, I thought, "that's going to confuse some folks." For the sake of clarity, I'm an Episcopal priest (i.e. Protestant) and female. And while I'm currently single, I'm allowed to marry, have kids, change jobs, etc.

I agree that my choice of career limits my options. I knew that when I gave up a high-paying career for a low-paying one, and became part of the downwardly mobile. It's why I've chosen to house hunt in Vallejo -- I've no expectation or sense of entitlement to an Oakland or Berkeley address, let alone one in NYC or Washington, DC.

My point from the beginning was simply to speak up and say that homeowner assistance programs are not all bad -- they need some tighter rules, but getting rid of them altogether is going to make it a lot harder for the market to recover now that lenders are making the barriers to entry so much higher.

As for Vallejo, I think the market here will thrash around for a bit more, but I also think we're closer to the bottom than most places. I've bid on three houses so far, and in each case found myself contending (and losing!) in multiple-bid situations. Given that I plan to live in the house for a good long while, the current market pains are my opportunity to finally have a stake in California real estate.

Of course, the classic rule of finance is buy low, sell high. While the market hasn't hit bottom, it's a lot lower than it used to be, and I'm willing to ride out any remaining dip before waiting for the eventual recovery. In the meantime, my PITI will still be lower than my rent.

And, I have to say, Episcopalians have great house blessing parties!

MD. I agree that the market requires first-time homebuyers to recover. This was part of other comments I've put up where I note that due to lack of savings, the market won't recover back to "normal" for longer than expected.

However, I hate to say it, but there are a couple places in this country where people with low-paying jobs (and I think clerical work counts--I'm a practicing Catholic, so understand that I'm not denigrating the position, it just doesn't pay) have never been able to afford the "median" house. NYC for one, the Bay Area post-1978 for another. For the past 30 years, prices have averaged 6X income in the Oakland/Fremont/Hayward MSA--which you likely consider unaffordable in your prudence (I do too, in fact). They've dropped as low as 4X income, though, so that's potentially a good marker as to when to buy.

If you want to buy in Solano, go ahead. I don't think the market there will recover for a bit, so why don't you keep looking for the right spot. As to down payment assistance, I bet you can find a seller willing to credit you, so that you can essentially capitalize some costs so that you don't have to use your entire savings. And yeah, if you can get assistance, go for it.

But the fact remains, until demand drops off, certain places in this country remain unaffordable to those who don't make $$$. I don't bemoan the fact I can't afford something equivalent to my house in NYC. I can't. That's the way it is. I also can't afford a house in London, Moscow, Paris Hong Kong, or Tokyo. Etc.

David,
I’d feel a lot better about your analysis if you’d asked even a single question before sharing it. Given that it’s my life you’re summarizing so neatly, it’s a little rough to be told that I’m either too extravagant, too poor or located in the wrong place to buy a house right now.

So let me provide some background.

I’m 44.

After five years of low-paid but amazing work as a congressional staffer in DC, I went on to business school at Northwestern University, where I earned my MBA and racked up $75K in student loans.

After three years as an entry level management consultant in Boston, I realized there was something missing. I came to California when I was offered a full scholarship to attend seminary, though I added another $18K in student loans to cover living expenses.

I currently hold a ¾ time position as a parish priest and use the remaining time to work as a freelance consultant, which is what allows me to survive in the Bay Area. In addition to the $25K I’ve saved for a house, I’ve also got $35K put away for retirement and have paid down $60K of my student debt, all on a part-time priest’s salary, supplemented by occasional consulting assignments.

Perhaps now you can see why I’d find it a little galling to hear from you, or anyone, about saving money.

Because consulting work can be an iffy proposition in a down economy, I am planning to buy a house I can pay for on just my church salary, which is why I am looking at houses in the range of $200-$250K. These are starter homes which have already seen a huge price cut here in Solano County, and where a bottom is roughly beginning to emerge. These are the houses which, when the market eventually comes back, will see the quickest rise. Most importantly, these are the houses which will allow me to pay LESS for my mortgage, interest, taxes and insurance than I currently pay in rent for a comparable house.

My original point was that I am the sort of first-time homebuyer this market needs. I’m educated, cautious, have been incredibly methodical in my analysis and am being very, very conservative in my estimation of what I can afford. (The bank, based on my tax returns, is willing to give me a lot more than I’m willing to take.) I stayed out of a market willing to sell me a house for nothing down (I knew it wouldn’t work) and I waited for the market to come to me, being prepared to rent forever if it never did. I even moved to Solano County (I work in Oakland) to make it all possible. If, for the sake of prudence, I can get some help with the down payment, I’m going to take it, and I don’t think it suggests I’m not worthy to own a home.

As I said before, until someone like me can buy a house, this market’s going nowhere.

Yep. First of all, the market's going nowhere. Second of all, starter homes appreciated the most in terms of percent during the bubble years, they will drop the most during the bust years. You're likely better off avoiding buying a starter home/condo (which is admittedly pretty much all you could afford now with even $40,000 saved up, and 10% down).

I'll admit $25,000 is a lot of money. What you didn't say is how old you are, and how long it took you to save that. Remember 32 has been the median age for 1st home purchase in the USA for(almost)ever.

Let's think about $25K. Not to be harsh, but if you're making, say, $100K with your two jobs, and spending $1800/month on rent, you should have saved that up in a year (if you're single). If you don't believe me, you're wasting a lot of money, and we should go over your budget. You expect to buy a house with 1 year's of savings? Again, see above, median home purchase age is 32, with savings collected over about 10 years of working. Just save for another 3 years, you'll have $100K and can easily fit into a $400-500K house.

If you're making, say, $50K with your two jobs, let's say you're paying $1000/month in rent, you should still be able to save $25K in about 3-4 years. Again, not quite the median working time to do so, historically speaking. But wait, even with 20% down, how are you going to make the payments with $50K/year income? There's no way. (max payments=$1600/month, or about a $200,000 mortgage, plus taxes&insurance).

So, either 1) You're making enough money so that you saved up that cash over a short period of time, and likewise you only need a few more years to finish up and buy or 2) You're not making enough money because it took you years to save that, and you won't be able to afford anything until the prices drop precipitously or 3) You're making enough money but wasting too much--you should cut the fat out of your budget and buckle down--you'll save enough again in 3ish years and be read to buy.

If you don't believe me, I managed to save $3500 in one year I was making a grand total of $25,000/year, rent was $950/month, and I was paying for my own health insurance. So either save more money, and you'll be there in a short time, or you have to make more money, because you're income is too low at current prices. Or of course, you could always move to a cheaper place and have a better lifestyle if your job(s) are relatively replaceable (thinking health care worker, etc).

MDAccount, it's good to see from you! And by all means, MAJOR props for your hard work, your two jobs (whew!), and your $25K savings. If more folks had done as you did, much of today's mortage mess could have been avoided.

I think you say it all with, "Until people like me can buy a house, the market’s going nowhere."

My sense is that these good folks who comment often on Redfin, and a number of experts (well, actually, those two are one and the same in many cases, seems to me!) would say that day is coming, possibly in the next few months, yes? Can I get an "amen?"

We can quibble about the size of down payment that should be required, but the pretty much inescapable reality is that one of the reasons we are in the mess we are in is because mortgages were granted to too many people who had "no skin in the game". As soon as prices decline even a small amount, these folks are under water and have little incentive to keep paying a mortgage based on a purchase price that's now larger than the market value of the property. The advantage of requiring a reasonable downpayment is twofold, namely that buyers have demonstrated an ability to save, and that they are less likely to walk away when it's their own $$$ that are effectively on the chopping block first.

MDAccount, I agree with you, until you can buy a house, the market is going nowhere. You have shown thrift and responsibility and saved a chunk of cash, you should be able to buy a house.
The FHA only requires a 3% down payment, which cannot come from the seller or lender. FHA now allows loans to $729,750 in SF, (for example).
So your $25K might get you a loan for the full $729K allowed. But getting that loan could ruin you, as the costs of mortgage, insurance, taxes, and upkeep grind you down.
Wouldn't you rather be competing for a home only with those who have saved their money, like you have, or would you rather compete with those who will buy at any price assuming that the price will go up, and if it doesn't they will walk away?
The zero down, liar loan, negative amortization and seller buydowns is what has driven the cost of entry homes to the current absurd levels; prices need to drop 30% or more to get back to affordable levels, 50% in some areas.
When lenders start requiring 20% down, it tells you something: the people who should really know home values feel they need that much to protect themselves from dropping values. The predicted drop in the median bay area home value will eat your $25,000 at least 3 times over, was it so easy to save that you don't mind losing it?

Whoa -- I suspect its only current homeowners who are so fierce about "if you can't save, you can't buy." As a renter currently looking to buy, I might have a different perspective.

First, one of the reasons I plan to now buy is because it will save me money. By purchasing a low cost house in a time of rising rents, I'll actually pay less in mortgage, interest, taxes and insurance than I would in rent. And that doesn't even factor in the tax deductions or the long-term (note the use of long-term) appreciation gains from ownership.

Secondly, I have saved $25K for this purchase. I have done so while renting. I'm single, which makes it easier, and I've worked two jobs. I have met all the requirements of those who say you can't buy if you can't save. I've saved. I've worked. I'm trying to save more. So, give me a break, eh?

Now, what will my $25K get me? Not all that much. Credit requirements have tightened, meaning buying with less than 10% down is increasingly hard. Given that I also have to pay closing costs, moving costs, etc., this means I could afford a $200K house -- with 10% down, that leaves me $5K for closing and moving, which isn't a lot.

Now, how many $200K homes do you know of that aren't in need of some immediate repair? Even up here in Solano County, where there are some reasonable homes in my range, $200K doesn't get you far.

To be a responsible buyer, I'd like to put down as little money as possible so that I can have a reserve fund for repairs and maintenance, thus ensuring that I can make my payments and fix the house I can afford. If an assistance program will help me do that, why shouldn't it be available to me? I've got excellent credit, a proven history of saving, and a strong financial plan. I can easily handle the monthly costs; where I'm getting killed is in the one-time, up-front costs.

For many first-time buyers the issue is cash-flow, not credit-worthiness. Which is why so many home-buyers through history have borrowed from friends and relatives to make the down payment. How, I wonder, is borrowing from someone else any different than accepting a home assistance deal? What, the First Bank of Mom and Dad is OK but AmeriDream isn't?

Yes, every buyer should show that they have savings and a sound financial plan. They should have some amount of investment in the house -- no money down deals are bad all the way around. Assistance programs, however, aren't evil, and while they may need to be tightened up a little, they don't need to be tossed.

If the up-front cash barrier to home buying stays high, well, good luck getting the housing market healthy again. Until people like me can buy a house, the market's going nowhere.

Harsh, harsh, harsh! You guys! Saving $30,000, that's a lot to ask, yes? What if they have maybe $10,000 saved? That's still not going to get them in a house.

Still, I do see the sense in Red's, "if you can’t save while renting you can’t afford to buy." David, I guess what you are getting at is that people need to have savings as a cushion if they get laid off or whatever?

Why have these programs?

Because if you can't save money for a down payment, you WILL lose your house to foreclosure or experience a forced move if you're lucky enough to have some equity. Why?

You have a demonstrated history of inability to save money. Therefore, WHEN you lose your job, get sick, get divorced, need to buy a new roof, etc etc, you will not be able to make your payments during the hard times.

I don't care how optimistic these lovely young first-time homebuyers are about their earning prospects, etc, they will have hard times. If you haven't saved, you're done.

Yeah, I think I agree with Red. These programs may mean to do good things, but I think that forcing people to save a downpayment by themselves weeds out some people that probably shouldn't be home owners.

Kind of a shame. Also, I'm pretty sure that taken as a group, defaults are higher for borrowers that get down payment assistance. No links, but I'll see if I can find some references to support that.

If the seller puts up the downpayment, then that is a clear indication that the home is not worth the price; what kind of good is done by putting a buyer in a home that they can't afford and that is worth less than they paid for it?
Home prices must come down to where they are affordable. And home ownership costs more than renting, if you can't save while renting you can't afford to buy. Any negative change in income for a home owner who is maxed out is a disaster, there is enormous cost in getting out of a home that is too expensive. For a renter, there is just the costs of moving to somewhere cheaper/smaller.
Killing these buyer assistance programs is GOOD for the buyer.